FDI In Africa Research Articles

INTRA-REGIONAL TRADE IN AFRICA AND THE IMPACT OF CHINESE INTERVENTION: A GRAVITY MODEL APPROACH

1. INTRODUCTIONChina has grown at phenomenal rates in the last few decades. However, in order to sustain these high growth rates, China needs to ensure a steady supply of natural resources like oils, minerals etc. The country's energy demands have more than doubled in the past few decades, leading to increasing pressures for meeting demands for natural resources (Vines et al., 2009; Taylor, 2009). These factors led China to look overseas for sources of mineral resources and could explain the increasing involvement of China in Africa since the late 1990s (Berthelemy, 2011; The Economist, 2008; Mohan, 2008; Marysse and Geenen, 2009; Kaplinsky, McCormick and Morris, 2006; Meier zu Selhausen, 2010). The NYU Wagner School Study concluded that 'China's foreign aid is driven primarily by the need for natural resources' (Lum et al., 2009, p. 5). Similarly, Foster et al. (2008) conclude that 'most Chinese government-funded projects in Sub-Saharan Africa are ultimately aimed at securing a flow of Sub-Saharan Africa's natural resources for export to China.'China-Africa trade has increased sharply since 2000. China's bilateral trade with Africa grew from USD 11 billion in 2000 to about USD 170 billion in 2011 (Direction of Trade Statistics, IMF, 2012). China has gradually progressed from one of the smallest among the top 10 trading partners of Africa to become its leading bilateral trade partner.1 To promote trade with the continent, China removed tariffs on 196 types of imports from 28 least developed Africa countries in 2005. By 2007, this had expanded to 454 items (Besada, Wang, and Whalley, 2008). Most African exports now receive duty-free access to China's market. These preferential tariff treatments have helped expand African exports to China.But most of the products for which China grants tariff exemption are principally raw materials. Thus, most of the increased trade flows represent a rising export of natural resources to China. About two-thirds of all African exports to China are oil and oil-related products.2 Africa showed a USD 20 billion trade surplus with China in 2011. But more than three-quarters of the continent's exports were oil, gas, metals and minerals from only five countries - Sudan, Angola, Egypt, Nigeria and South Africa. Excluding oil exports, Africa had a trade deficit with China amounting to USD 28 billion in 2011.3 Thus, the growth of African exports to China is driven by a very few countries. Apart from these few very resource-rich countries, the majority of African countries have 'mounting trade deficits' with China (Corkin, and Burke, 2006). This highlights the asymmetry of the relationship between China and African countries.Chinese investment in Africa has also increased dramatically. From USD 20 million per year in the early 1990s, Chinese FDI in Africa jumped close to USD 100 million in 2000 and reached more than USD 1 billion in 2006 (Zafar, 2007). Most of these investments are focused on long-term access to raw materials. Five resource-rich African countries - South Africa, Nigeria, Zambia, Algeria, and Sudan accounted for 87 percent of Chinese FDI inflows on average during the four year period of 2005 to 2008 (Meier zu Selhausen, 2010). Eisenman (2012) argues that almost all of Chinese investment into rail projects in Africa is aimed at connecting African raw material suppliers with Chinese buyers and Chinese goods manufacturers with African customers.Since the late 1990s China's aid to Africa has also increased significantly. There's no consensus in the literature so far regarding the determinants of Chinese aid to Africa. While Naim (2007) argues that political and commercial interests are the principle determinants of Chinese aid to Africa, Dreher and Fuchs (2011) argue that China is no different from other donors and Chinese aid allocations are not dominated by natural resource considerations. However, a large number of studies do suggest that Chinese aid is increasingly directed towards resource-rich Sub-Saharan African economies (Kaplinsky, and Morris, 2009; Brookes, and Shin, 2006). …

Chinese MNEs and managerial knowledge transfer in Africa: the case of the construction sector in Ghana

This paper considers the case of managerial knowledge spillovers from Chinese FDI in Africa, in the context of the Ghanaian construction sector. Using empirical data from in-depth qualitative interviews, the paper first identifies key channels and determinants of managerial knowledge spillovers. Limited local employment at the managerial level in Chinese construction firms is the main impediment to managerial knowledge spillovers from these firms. Cultural and linguistic barriers can explain this situation. Localisation strategies, defined as the progressive replacement of Chinese managers by local ones, can help overcome these barriers and foster managerial knowledge spillovers.

Sino-Africa economic and Chinese foreign direct investment in Africa on bilateral trade relations

The purpose of this paper is to investigate the impact of Sino-Africa economic and Chinese FDI on Africa trade relations. China’s phenomenal economic growth rate has made the country rise to world leadership status, causing many analysts to ponder over its regional and international intentions and goals. Its investment is paying off now mainly in oil and other raw materials imports and manufactured goods. We used a panel data to analyze Chinese FDI exports to Africa, and a time series data to investigate the effect of its imports from Africa. The study shows that Chinese FDI in Africa has contributed significantly to increase Chinese exports to Africa as well as imports from Africa. It means that Chinese DI in Africa is an important factor for explaining the growth of the bilateral trade. The research found also that per capita income and annual percentage growth of domestic product of China have a positive effect on its import. China might experience significant backlash from other world powers due to its involvement in African affairs. This paper aims to highlight the tight rope which Africa and China have to balance in their new found relationship to keep it on a win-win situation. Key words: Economic development, Sino-Africa, trade, FDI, growth.

FDI in Africa: A Comparison of the Indian and Chinese Experience

Over the last decade there has been a gradual but marked shift in the main donors of FDI funding for Africa from the traditional western developed countries to the BRICs nations. India and China in particular have become significant players in the continent. How far this altered trade and investment relations is assisting the creation of opportunities or posing new challenges for the African economy has attracted considerable scholarly and government attention. While it is obvious that any increase in FDI is welcomed by Africa as it helps boost economic growth and development, there are also concerns about the exploitation of natural resources. It is against this backdrop that this paper seeks to investigate the nature and trend of foreign direct investments made by India and China in Africa, over the past decade. While comparing the quantitative data, the focus will be on revealing similarities and dissimilarities in the patterns of development cooperation of the two Asian giants in Africa to provide better insight on the specific consequences of Indian and Chinese FDI for economic development in Africa.

The determinants of Indian FDI in Africa: A structural equation approach

Much has been written in economic circles about the rising investment of the BRICS countries in Africa, yet there is scant literature on the determinants of FDI from these countries to Africa, and no studies have reported on that from India. In 2012, Indian FDI surpassed that of China, making India the largest developing country that is a direct investor in Africa. This study focuses on understanding the determinants of Indian FDI in Africa using structural equation modelling (SEM), which includes factor analysis and regression estimations. The specific determinants that influence the number of Indian FDI deals in Africa include government effectiveness, control of corruption, crude oil price, school enrolment and exports. The value of the investments is influenced by government effectiveness and rule of law. We conclude that India’s increasing involvement in Africa is driven by trade and resources. It is, however, differentiated through a strong focus on good governance.

Chinese FDI in Africa

Chinese FDI in Africa

Value Chain Dynamics of Chinese Copper Mining in Zambia: Enclave or Linkage Development?

This article focuses on the distinctive nature of Chinese FDI in Africa, specifically copper mining value chains in Zambia and local sourcing linkages. In order to secure supply, China has become a substantial foreign investor in the Zambian copper extractive sector acquiring control over copper mines, smelters and processing industries. The expectation is that the Chinese mines would operate as enclave operations concerned only with securing raw materials for its industrial and infrastructural needs, and promoting exports from Chinese companies. In this article, we analyse and compare the Chinese copper mines with Northern and South African mining companies in Zambia in terms of the distinctive manner in which their supply chains operate. We do this by examining the role of linkages between mining activities and local suppliers in terms of access, delineation of critical success factors and upgrading strategies.

English

China’s economic progress and relations with other developing regions have received much attention, particularly the way in which Sino-African relations have evolved since 2000. This paper aims to put Chinese FDI in Africa into perspective and provide some answers on the nature and possible impact of these flows to the continent. The study examines Chinese FDI flows to Africa between 2003 and 2008. During this period, China’s outward FDI to Africa was concentrated in diversified, medium growth economic performers, with Southern Africa being the most popular region for Chinese outward FDI. A literature survey on Chinese investment deals concluded in Africa, demonstrated a definite Chinese interest in mining, oil and infrastructure in Africa. Using panel data analysis, agricultural land, market size and oil are found to be important determinants of Chinese FDI. The fact that market size was important indicated that Chinese investment was not solely resource-driven. As regards the possibility that Chinese FDI could positively contribute to economic growth in Africa, causality tests concluded that the relationship between African GDP and Chinese FDI was bi-directional, while uni-directional relationships were established between Chinese FDI and African infrastructure and corruption, respectively. Key words: Foreign direct investment, Sino-African relations, China.

Drivers of China’s Foreign Direct Investment into Africa

We assess the determinants of Chinese direct investment in Africa compared with those of global FDI. We find that economic size and macroeconomic stability are positively correlated with Chinese and global FDI in Africa. Institutional variables, such as accountability and rule of law, are not significant in either case and the same can be said about FDI-aid complementarities. The presence of oil is a determinant of Chinese FDI but not of global FDI into Africa. Conversely, the openness of the economy is a determinant for global FDI but not of Chinese FDI, which appears to favour closed economies possibly due to industrial organizational concerns. While these differences accord with intuition, we find no evidence for the claim that Chinese FDI in Africa is related to non-economic governance in a specific way that differs from global practice. More refined governance indicators should be used to verify whether Chinese and global FDI into Africa remain indistinguishable on this score: we plan to do this in future research.

AFRICAN HUNT FOR INVESTMENT: ANY CHANCE FOR SUCCESS?

During recent two decades the world has witnessed a drastic increase in global FDI inflows. Gradually more and more investment has been directed to the developing countries in the attempt to diversify portfolios and use finance in the most efficient way. Not all developing regions of the world perfectly succeeded in attracting FDI. Large by labor force and territory, abundant in natural resources Sub-Saharan Africa could perform much better in this aspect. This paper once again reviews the opportunities for FDI in Africa and suggests possible ways for authorities of African states to overcome the existing situation.

African hunt for investment: any chance for success?

During recent two decades the world has witnessed a drastic increase in global FDI inflows. Gradually more and more investment has been directed to the developing countries in the attempt to diversify portfolios and use finance in the most efficient way. Not all developing regions of the world perfectly succeeded in attracting FDI. Large by labor force and territory, abundant in natural resources Sub-Saharan Africa could perform much better in this aspect. This paper once again reviews the opportunities for FDI in Africa and suggests possible ways for authorities of African states to overcome the existing situation.